There are many ways to deliver your products to your customers. Most merchants start with just one distribution channel, like a brick-and-mortar or an online store.
As your business grows, you might want to reach your customers through more channels, such as a physical store, online store, and marketing through direct mail.
No matter what channels you choose, selling through various channels requires a multichannel distribution system. This complete guide demonstrates everything you need to know about a multichannel distribution system.
Multichannel Distribution System Definition
Merchants can choose which channels they want to distribute products to their customers. Distribution channels can be physical stores, branded websites, marketplaces like Amazon and eBay, and direct mail.
Each of these distribution channels represents a different way for a customer to buy from a merchant. They can buy directly from you, as you provide the product directly to them. Consumers can also buy indirectly, as when you provide another retailer, or third-party with your goods to sell to customers.
A multichannel distribution system then is when a merchant decides to strategically distribute their products to customers via multiple channels, such as directly through physical stores, an online marketplace like Amazon, or through another large retail chain.
Multichannel Distribution Example
For example, Starbucks uses a multichannel distribution system by selling in their own-stores, grocery stores, and their own online site.
Another example would be a manufacturer. A manufacturer can sell their products to distributors to sell to customers. They also can have their own eCommerce site to sell directly to customers.
There’s many reasons why a merchant would want to use a multichannel distribution system.
Advantages of a Multichannel Distribution System
Today’s customers shop across all different channels for convenience and to find the best price. As a merchant, you want to be where your customer is. This is causing merchants to expand their business to new channels and benefit from its advantages.
Reach Same Customers in New Channels
A multichannel distribution system allows you to provide your customers new channels to shop in. Instead of a customer always having to make a trip in-store, they can conveniently buy from you online or another store, like a grocery or department store. You’ll allow your customer to shop as they want.
Expand Customer Reach
Selling in multiple channels can lead to new customers. If you start selling on Amazon, there’s a whole new audience for you to appeal to. Each channel has the potential of expanding your customer reach.
Provide Omnichannel Experience
Customers expect to be able to research, shop, and buy across multiple channels. They will bounce back and forth between different channels to ensure they’re getting the best price and purchase as they want. Making your product available across multiple channels allows you to provide that “omnichannel” experience that customers are searching for.
The main advantage of expanding your business to new channels is the opportunity to grow your sales. New customers and new channels can lead to more opportunities for revenue. Growing your sales is a key reason for expanding to new channels.
Even with advantages like these, there are some disadvantages that hold merchants back from expanding their business.
Disadvantages of a Multichannel Distribution System
A multichannel distribution system can cause problems for some merchants.
Cannibalization of Sales
One fear of selling on new sales channels is the cannibalization of your sales. If you invest in your online business, you can see a major drop in your physical store sales as customers flock to the convenience of buying online.
This can be a problem for retailers who see lower margins and higher costs to sell online. With fierce online competition, product prices can be forced too low for merchants to make a meaninful profit.
Complexity of Multichannel Selling
Another fear of multichannel selling is the complexity of it. It’s complicated to sell on multiple channels. You have inventory to manage, orders to fulfill, and suppliers to work with. All of your order, items, inventory, and customer data must be exchanged between multiple systems.
This complexity can lead to management problems. Online orders can be fulfilled slowly and incorrectly. Inventory levels can be displayed wrong, which can lead to overselling. Product information can be inconsistent across sales channels.
These problems lead to a poor customer experience which can be the downfall of your company.
What can you do though to ensure that these problems don’t hurt your business?
How to Overcome Complexities of Multichannel Distribution Systems
The fear of multichannel complexity shouldn’t stop you from your growing your business. There are ways to overcome the complexities of a multichannel distribution system.
Choosing the Right Channels to Sell On
First, merchants need to be strategic in what channels you choose to sell on. Not every channel is going to be best for your business. Think strategically about where your customers are, what type of products you sell, and how you run your business.
If you sell old, collector items, eBay is probably a better choice than Amazon. If you’re a manufacturer that traditionally sells to distributors, do you have the capabilities to sell directly to consumers via your own online store?
To help you determine what channels to expand to, check out our guide: Evaluating Channel Expansion Opportunities. It’ll help you determine what channel type is the best fit for your business model.
Invest in a Multichannel Integration Platform
As your multichannel business plan comes together, you need to think about how to connect your business. It’s too complex to manage your multiple systems and processes in their own silos.
You might be tempted to believe that each channel should operate as its own line of business. Each channel would have its own processes, different from your other channels. This becomes too difficult to manage.
Instead, you must view your company holistically. Sales, customer types, and fulfillment processes should be unified and managed consistently.
If an online order comes in, whether it’s Amazon or your own site, you should be able to fulfill through it the same process. If you’re out of stock in-store, an associate should be able to order the product for the customer online. A customer should be able to return an online order to your physical store.
This is much harder to achieve if you’re operating each channel as its own. You won’t have the visibility you need to manage it properly. (Read more about understanding the complexities of the multichannel experience.)
Breaking down capabilities stored into their own channels helps merchants deliver the buy anywhere, receive anywhere, return anywhere that today’s shoppers demand.
To help you do that, merchants can invest in multichannel integration platforms that help connect their systems and processes.
Through integration, merchants can update inventory availability across channels as transactions occur. They can fulfill orders automatically through workflows, no matter what channel they come in from. They can push consistent product information across sales channels. You’ll have tight integration with your suppliers.
See how an integration platform works by checking out nChannel’s multichannel management platform.
What to Do Next
There are many different types of integration platforms available. Choose the one that allows you to operate your multichannel business as you need.
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